Fuel prices at the pump have not trended the same way as crude prices since 2014. This is because the tax component accruing to both the Centre and the States has significantly risen (from 31% of retail price for petrol in Delhi in 2014 to 63% in December 2020). With the government not passing on the benefits of falling crude prices to the public, Indians have spent on an average 17% of their daily income on fuel, a number matched only by Pakistanis among other nationalities.
Petrol prices v crude prices
The graph plots the petrol price in Delhi (in ₹/litre, in red) against the crude price - Indian basket (in $/bbl, in blue).
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- Despite crude prices falling in 2015-16, petrol prices remained unchanged as the tax component of the price at the pump was raised.
- When crude prices started to rise again from 2017, petrol prices also increased.
- In 2020, when crude prices fell again, petrol prices at the pump did not remain unchanged as in 2015-16 but increased, because of a surge in taxes. This is reflected in the diverging trend lines for both prices.
Heavily taxed
The base price of petrol in Delhi without taxes, duties and commissions was ₹47.12 in May 2014 and reduced to ₹26.71 in December 2020 - a 43% decrease. In the same period, taxes, duties and commissions recorded a 129% increase from ₹24.29 to ₹55.63.
The Centre rakes it in
In the chart, the bars represent the contribution of the petroleum sector in ₹ lakh crore to the Central (light blue bar) and State govts. (light red bar) and the lines represent the same as a % of the Centre’s (orange line) and States’ (red line) total revenue. In FY13, only 13% of the Centre’s revenue was from this sector, but it increased to 24% in FY17. However, the sector’s contribution to the States’ coffers decreased slightly between FY13 and FY20.
Paying a heavy price
Indians (and Pakistanis) spend on an average 17% of their daily income on fuel*. The average for citizens among the rest of the 57 nationalities analysed did not cross 10%.
*based on IMF’s 2019 GDP per capita figures
Source : PPAC, Bloomberg
